Business Loans in India — Mudra, Term Loan, Working Capital, Cash Credit, Overdraft and Fixing a Rejection
Quick answer: The business loan that fits depends on what the money buys: a term loan funds machinery or premises, while working capital (cash credit or overdraft) funds stock and receivables and charges interest only on the amount drawn. Mudra loans for non-farm micro units come in four tiers — Shishu up to ₹50,000, Kishore above ₹50,000 to ₹5 lakh, Tarun above ₹5 lakh to ₹10 lakh and Tarun Plus above ₹10 lakh to ₹20 lakh for borrowers who have repaid a Tarun loan. Stand-Up India lends ₹10 lakh to ₹1 crore to SC/ST and women entrepreneurs for greenfield units, and CGTMSE can remove the collateral requirement up to ₹10 crore. A rejection is usually a data problem — CMA figures, DSCR, margin or credit score — that can be corrected and resubmitted.
Last verified 5 October 2026 — rules on this page checked against the current notifications. We update it the day a rule changes.
Choosing the loan
| Need | Loan | How it works |
|---|---|---|
| Machinery, factory, shop fit-out | Term loan | Fixed amount, EMIs over a set tenure, secured on the asset plus margin from the promoter |
| Stock, raw material, receivables | Working capital — cash credit (CC) | Limit sanctioned against stock and debtors with a drawing power; interest only on the amount used; renewed yearly |
| Short-term cash gaps | Overdraft (OD) | Limit on the current account, often against fixed deposits or property; interest on the overdrawn amount |
| Very small non-farm unit, no collateral | Mudra (PMMY) | Shishu ≤ ₹50,000 · Kishore ₹50,001–₹5 lakh · Tarun ₹5–₹10 lakh · Tarun Plus ₹10–₹20 lakh (repeat borrowers who repaid a Tarun loan) |
| SC/ST or women, new unit | Stand-Up India | ₹10 lakh to ₹1 crore for greenfield manufacturing, services or trading — current scheme terms are confirmed with the bank branch |
| No property to pledge | CGTMSE-covered loan | Guarantee up to ₹10 crore for Udyam micro and small units — see CGTMSE |
Why loans get rejected — and the fix
- Weak or inconsistent CMA data: projections that do not tie to the balance sheet; fix with a proper CMA and DPR — DSCR above the bank's floor, realistic margins, working-capital cycle
- Credit score or conduct: overdue EMIs, high utilisation, cheque returns; clear and wait, or add a co-applicant
- Margin and collateral gap: promoter contribution short; restructure project cost or use CGTMSE hybrid security
- Documents: ITRs, GST returns and bank statements that do not agree with each other; reconcile before the application, not after the query
- Wrong product: asking for working capital to buy machinery; re-paper as a term loan
After a rejection, ask for the reason in writing, correct the specific ground and resubmit to the same or a better-fit lender with a covering note on what changed.
Documents for a typical MSE application
- KYC of promoters, Udyam certificate, GST registration, PAN of the entity
- Last 2–3 years' ITRs and financials, provisional figures for the current year, 12 months' bank statements
- Project report or CMA data, quotations for machinery, proof of promoter margin, property papers if collateral is offered
What we do
- Product selection, CMA data, DPR and projections; lender approach and branch follow-up in Delhi-NCR and Patna
- Loan-rejection review and resubmission file; CGTMSE, Mudra and subsidy stacking with PMEGP and state schemes
- Related: business loan and subsidy desk, 2025 MSME limits
Dates, forms and thresholds are quoted from the governing Act, rules and official portals; where a figure changes by notification or year, the page says so and we confirm it at filing rather than estimate.
Talk to us before you file anything
Frequently asked questions
What are the Mudra loan categories?
Shishu up to ₹50,000, Kishore above ₹50,000 to ₹5 lakh, Tarun above ₹5 lakh to ₹10 lakh, and Tarun Plus above ₹10 lakh to ₹20 lakh for borrowers who have repaid a Tarun loan.
Is a Mudra loan collateral-free?
Yes, for eligible non-farm, non-corporate micro enterprises, with credit-guarantee cover for the lender; approval still depends on the lender's checks on cash flow and credit history.
What is the difference between cash credit and overdraft?
Cash credit is a working-capital limit against stock and debtors with a drawing power, renewed yearly; an overdraft is a limit on the current account, often against deposits or property.
Term loan or working capital loan?
A term loan for assets such as machinery and premises, repaid in EMIs; working capital for stock and receivables, drawn and repaid as the business cycle needs.
What is the Stand-Up India loan?
A bank loan of ₹10 lakh to ₹1 crore for SC/ST and women entrepreneurs setting up a greenfield enterprise; check the current scheme terms with the branch.
Why was my business loan rejected?
Commonly weak CMA data or DSCR, credit-score issues, a margin or collateral gap, mismatched ITR, GST and bank figures, or the wrong loan product.
Can I reapply after rejection?
Yes — get the reason in writing, correct that ground and resubmit with a note on what changed.
Can I get a business loan without property?
Often yes, through Mudra for small amounts or a CGTMSE-covered loan up to ₹10 crore for eligible micro and small units.